View more on these topics

Craig Newman: No hiding place on fund charges

 

Newman Craig WIM

The FCA could not have made it any clearer. Fund management companies “must” put consumers at the heart of their businesses when it comes to fees.

In its report, clarity of fund charges, it stated: “It is important to make comparing costs as easy as possible. As part of the overall relationship between firms and consumers, firms need to manage the costs with as much tenacity as they produce returns and make the costs they charge clear.”

We were not privy to the draft report while the FCA was carrying out its due diligence on Woodford Investment Management but we recognise we live in a new world where transparency rules. There are no hiding places for fees, commission and charges in the RDR world.

Many fund groups now offer clean share classes – a move that is addressing many of the regulator’s concerns – while the ongoing charge figure has replaced the total expense ratio in a bid to make fees easier to understand.

As a new firm, we are in a prime position to embrace the new world free from the burden of legacy issues. It is why we decided to absorb fund-related expenses into our fund’s annual management charge. This brings our OCF down to meet the AMC rather than increasing the AMC to meet the OCF which simplifies fee matters further.

We are not claiming we have found the panacea to all fund fee ills. There are some fund-related expenses, such as stamp duty and dealing commission, that the industry is unable to include in the OCF. We will continue to work on a more transparent solution to this issue.

The fund’s A share class is intended for those direct investors who are not tempted by the lower fees available to supporting platforms and intermediaries. Some people have raised their eyebrows at our high minimum investment of £150,000 for direct investors. But we are a fund manager tasked with managing client’s money. That is our focus, we are not a fund distributor.

By encouraging investors to use fund platforms and intermediaries, we are able to keep our running costs low and this allows us to keep our fees lower for all our investors.

But this is not the only reason. We also want to encourage investors to use intermediaries, fund platforms and execution-only brokers rather than buying directly from us because we genuinely believe this is in the majority’s best interests. It is through these channels where they will get the expert advice, access to research and analysis they require to make an informed decision.

There are tens of thousands investors needlessly paying more for a fund than they need to because they bought direct from a fund provider in the past. The rhetoric from the FCA suggests that this back book of business will continue to be under scrutiny. There are more appropriate and cost-effective ways to invest and we expect the proportion of investors buying direct to continue to decline.

Craig Newman is chief executive of Woodford Investment Management

Recommended

10

Carl Lamb: Unregulated guidance is a vision of hell

The Chancellor gave us his impression of old-fashioned magic when he pulled the pension changes out of his hat in the Budget.  The industry was somewhat taken by surprise by his utopian vision of the future – all pension savers will be free to cash in their pension pots when they reach 55 and will […]

Clark-Jamie-2012-MM-Peach-700.png
1

Jamie Clark: The Pensions Act measures worth knowing about

The Pensions Act 2014 received Royal Assent on 14May. The final regulations have not been published yet, but there are some measures in the Act worth knowing about. For qualifying pension schemes, the Act sets out the framework to allow Government to cap charges, and to ban active member discounts and commissions. These changes are […]

Trail cover 700x450.jpg
5

The big switch-off: Advisers and platforms grapple with turning off trail

The clock is ticking on the April 2016 sunset clause which will effectively turn off trail for advised platform clients. Platforms that traditionally adopted a bundled charging structure are working to prepare both advisers and clients ahead of the switchover in two years’ time. For advisers, this means they have less than two years to […]

FCA-FSA-Airplane-700x450.jpg
7

Ex-trade body chief to measure RDR impact on consumers

A study which aims to assess the full impact on consumers of the RDR has been launched by Garry Heath, the former IFA Association director general. Heath is in discussions with members of the Treasury select committee about how the results of the survey can be used to hold the regulator to account. The survey […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com